Are you considering your contracting options but faced with the dilemma of being inside or outside IR35. This is an opinion piece and I prefer contracts outside IR35 but sometimes its ok to take a position inside.
- Being inside makes calculating tax a lot easier, you get taxed a lot more but you get to keep all of your final pay with no nasty surprises.
- The take-home pay isn’t that bad, providing you can negotiate a half decent rate you will still be better off than most full-time employees ( though you don’t get the same benefits package)
- Being in work is still better than being out of work
- Alternating between jobs inside and outside means you can use your money effectively i.e. if you have lots of cash built into the business account you can withdraw them slowly for a rainy day, or if taking maternity leave you can pay yourself a high salary ( you will be taxed anyway via dividends tax at a later stage so pay yourself well when it really counts)
- Sometimes you can take a pay cut for interesting projects, or if they offer flexible working or its closer to home
I like to use this calculator
The choice is yours, you should remember to negotiate a rate that is inclusive of employers NI, if you don’t you will get approximately 13% less take home pay after your normal tax and NI contributions
You won’t be able to claim back for your lunch and travel but in the grand scheme of things, it’s still a small price to pay if you get a decent rate.
Going via the umbrella route can offer limited salary sacrifice to save a little more.
If you like this article you might like my other IR35 article